Quantile Connectedness Between Stock Market Development and Macroeconomic Factors for Emerging African Economies

This paper investigates the frequency dynamics of financial and macroeconomic connectedness by measuring tail-risk and uncertainty for two emerging African economies, namely Morocco and Tunisia, over the quarterly period Q2-2010 to Q4-2024. We employ a quantile connectedness approach, which, unlike traditional mean-based methods, leads to capturing asymmetries, tail-risk dependencies, and state-dependent spillovers, and to providing early warning signals of systemic stress and financial uncertainty. Our results reveal a stark divergence between the two stock markets in their roles in transmitting and absorbing shocks. The Moroccan stock market acts as a net transmitter, occasionally driving macroeconomic conditions and propagating uncertainty throughout the system. In contrast, the Tunisian stock market acts as a net receiver, with macroeconomic fundamentals, particularly GDP and money supply. These findings highlight how structural differences in emerging markets affect the transmission of shocks and offer actionable insights for policymakers, regulators, and investors to manage financial risks and uncertainty.